BoE Bond Buying Speculation Dominates

Cash Tsys run 1-2bp richer across the curve into London hours, with the belly leading the bid, while TYZ2 is +0-03 at 111-07+, hovering around the middle of its 0-14 overnight range on volume of ~105K (~40K of which changed hands in the last hour or so).

• The uptick in volume came as the space firmed on an FT source report suggesting that the BoE could extend its temporary Gilt purchases beyond the current Friday deadline (despite comments to the contrary from BoE Governor Bailey on Tuesday), with the Bank reportedly focused on the cash reserves of LDI pension funds in respect to potential margin call requirements.
• Still, it would seem that market participants are taking this as a case of kicking the can down the road, given the “temporary” nature of the already deployed, but ever evolving, BoE purchase scheme. This leaves the space off of richest levels at typing.
• 4x block sales of FV futures (-3.4K apiece) provided the highlight on the flow side before the FT story hit.
• Gilt gyrations will set the tone in pre-NY dealing. Further out, Wednesday’s local docket includes the minutes from the latest FOMC meeting, 10-Year Tsy supply and Fedspeak from Bowman, Barr & Kashkari. Although Thursday’s CPI print is of more interest.